‘One cannot judge a performance in any given field (war, politics, medicine, investments) by the results, but by the costs of the alternative (i.e. if history played out in a different way).’
Nassim Nicholas Taleb – Fooled by Randomness
Investing the Amazon way
Jeff Bezos, the well-known founder of Amazon, was recently asked a question about what’s not going to change in the next few years and how that will affect his business, which is an interesting lens through which to view things. He suggests that answering this question is potentially far more important than looking at what is going to change in the future, as it provides a foundation on which to build a robust business strategy. His response was as follows:
‘In our retail business, we know that customers want low prices, and I know that’s going to be true 10 years from now. They want fast delivery; they want vast selection. It’s impossible to imagine a future 10 years from now where a customer comes up and says, “Jeff I love Amazon; I just wish the prices were a little higher,” [or] “I love Amazon; I just wish you’d deliver a little more slowly.” Impossible.”
He then continues:
‘When you have something that you know is true, even over the long term, you can afford to put a lot of energy into it.’
Bezos is right. His wisdom applies not only to Amazon but also many other spheres, not least investing. Despite the lack of clarity about what might happen in the global economy, in political circles and in financial markets, we know certain things work to the benefit of sensible investors.
The inalienable long-term truths of investing
Irrespective of what might happen in the future – including any of the potential permutations of Brexit – as investors we can rely on a number of truths: markets work pretty well and are hard to beat, so capturing the market return on offer using lower-cost, well-structured products makes good sense; spreading our assets broadly to ensure the risks we face are well-diversified will always sit at the core of a successful long-term strategy; balancing out the risks of equities by owning high quality bonds provides a good insurance policy; being patient (living through the short-term dips) and being disciplined (maintaining your philosophy and strategy over time) are fundamental to achieving the returns you need to fulfil your financial goals.
Yes, we have some uncertainty and possible anxiety. But draw reassurance from the investment principles that sit behind your portfolio. It may be bumpy, but you are in the right place.